The emissions market has forced both power and gas up as it has been bought up by a few utilities, who are keen to see price rises. Despite the evidence which shows that the whole market is long to the tune of circa 70mn tonnes, the price has risen to a high of €21 and back down to €17 the UK and German power prices have climbed to reflect this but many players cannot understand why. Perhaps the biggest problem with the emissions market is that the length has always been bad at coming to the market. The fact that players who are short know that they will gain from buying and effectively paying for that optionality has meant that the utilities who are natural net shorts (but have the potential to sell) have been on a buying spree to reflect this market anomaly.

Ironically, some players are stating that emissions in rising on the back of power prices. This again does not make sense, if power prices are high it does not necessarily mean that system requires more of it, and the form in which it will be made will come from high emitting sources. In fact at the moment because coal is the cheaper fuel source, then the marginal power unit is gas.